Tesla Buys $1.5 Billion in BTC
Tesla enters the bitcoin market with a $1.5 billion buy... BTC hits a new high! PLUS, Lyn Alden's take on ethereum.
Tesla bought $1.5 billion in bitcoin.
We need to thank Michael Saylor and MicroStrategy for opening the flood gates last year. The institutional money continues to enter the market.
Tesla had about $19 billion in cash.
The $1.5 billion move into bitcoin is no small position.
Plus, it’s coming from one of the hottest companies, led by the world’s wealthiest person. This is a big day for bitcoin.
Why Buy Bitcoin?
According to their SEC filing, Tesla bought bitcoin for “more flexibility to further diversify and maximize returns on our cash.”
In retrospect, it was inevitable…
Elon Musk tweeted these words just days ago.
It comes as no surprise that Tesla bought bitcoin—it seemed to be only a matter of time. The move pushed bitcoin to yet another all time high.
Bitcoin is once again in price discovery mode.
An Analysis of Ethereum
Lyn Alden is quickly becoming a highly respected voice in crypto. She focuses on bitcoin but recently felt compelled to share her thoughts on ethereum.
I mine ethereum. I HODL some ETH.
My portfolio is, however, more than 75% BTC.
Lyn isn’t an ethereum-bull but understands why some investors take an 80/20 or 90/10 approach to BTC/ETH. There’s a potential high upside to ETH.
In my reading of Lyn’s analysis, the main takeaway is that she views ethereum as a work in progress. In truth, there’s no denying that.
Ethereum is transitioning from a proof of work consensus mechanism (this is mining, similar to what bitcoin does) to a proof of stake system. This has been and will be at least a multiple year process.
Throughout ethereum’s lifespan, they’ve also pivoted in terms of what their monetary structure is (i.e. rewards, incentives, distribution of coins).
There is also a centralized nature about ethereum.
This is seen in the fact that their is an actual organization, The Ethereum Foundation, and centralization is more functionally at play in the network’s reliance on third-parties for scaling up node validation and other services.
To put Lyn’s take simply, ethereum is more complex than bitcoin.
She says that “Ethereum attracts more experimentation.”
There’s nothing wrong with that, but it is distinctly different from bitcoin in that ethereum is more of a living, breathing project. It’s still developing and there’s no guarantee that the path they’ve laid out will remain as intended.
Network Effect Matters
There’s also a promising number of utility protocols being built on ethereum. Can ethereum sustain its place as the go-to network for these protocols and as the number two crypto behind bitcoin?
Competitors such as Cardano and Polkadot are looming.
(Full disclosure: about 3.5% of my portfolio is in Cardano)
I personally feel that ethereum has a significant first-mover advantage to its competitors (bitcoin not included), combined with a substantial market cap championed by institutional money.
Lyn’s analysis is a healthy pulse check on ethereum.
There is a solid roadmap in place for the second largest crypto and its future network. Now, they have to prove that they can hit their checkpoints in a timely manner AND while not slowing down the network or causing it to be a more expensive alternative to other, more centralized options.
For Now, ETH Is at All Time Highs
Investors are bullish on ethereum.
Like bitcoin, ETH is in price discovery mode.
It continues to test new all time highs.
Successful continuation of the ETH 2.0 roadmap should further bullish sentiment. Also, it always helps ETH and others when bitcoin is booming : )
$43,421.17—the price of bitcoin today.
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